Energy secretary says he OK'd Solyndra loan deal

Chu allowed solar business to get funding after default

Sept. 30, 2011 12:00 AMWashington Post

WASHINGTON - Energy Secretary Steven Chu on Thursday acknowledged making the final decision to allow a struggling solar company to continue receiving taxpayer money after it had technically defaulted on a $535 million federal loan guaranteed by his agency.

Chu spokesman Damien LaVera said in a statement that the secretary approved the restructuring agreement for Solyndra because it gave the company "the best possible chance to succeed in a very competitive marketplace and put the company in a better position to repay the loan."

Chu's acknowledgment came as some members of Congress questioned whether the secretary went too far in trying to help the company before it went into bankruptcy, leaving taxpayers on the hook for the loan.

Chu, a Nobel laureate and physicist who came from academia, arrived in Washington with a mandate to push out billions of dollars in stimulus funds into clean-energy companies and projects. With keen White House interest, Chu rode herd over an $80 billion showcase initiative that was supposed to spur a new "green" industry and economic growth.

Solyndra was the first company approved for a loan guarantee under the Obama administration, and its application had originated several years earlier under the George W. Bush administration. Early on, there were concerns about Solyndra's finances, but it was still endorsed by President Barack Obama and received high-profile support from Chu. Both visited the company at different press events. Chu flew to California to announce the loan approval at the groundbreaking ceremony of a $750 million factory that was built mostly with funds from the loan.

In announcing the Solyndra deal in March 2009, Chu boasted of the "speed at which the department can operate," according to an agency press release.

In April 2010, the company's auditors raised doubts about whether the company could continue as a "going concern" because of cash-flow problems. The following month, Obama visited the company to praise it as an "engine of growth."

In autumn 2010, company executives confided privately to the Energy Department that they were running out of cash and could not make a required payment to a cash-reserve account. The company was supposed to begin making the first of $5 million payments to create a $30 million cash reserve starting on Dec. 1.

Solyndra officially defaulted on its loan that day. Chu approved a softening of the loan requirements so the company could continue receiving loan installments.

"Ultimately, the choice was between imminent liquidation or giving the company and its workers a fighting chance to succeed. There were risks to both approaches and extensive discussion on how to best assess those risks," LaVera said in the statement, first reported by Politico.